Copper Futures Prices Race Higher On Mine Strike
Oct. 17, 1996
Copper futures prices rose sharply Thursday after workers walked off the job at one of the nation's largest mines at a time when the robust American economy is draining supplies.
On other markets, silver futures fell sharply, while heating oil and unleaded gasoline futures advanced.
December high-grade copper rose 2.25 cents to 90.90 cents a pound on the New York Mercantile Exchange.
Some 1,600 union workers at Kennecott Corp.'s Bingham Canyon copper mine and smelter in Magna, Utah, began striking late Wednesday after negotiations on a new six-year labor contract broke down.
The smelter can refine 281,000 tons of copper a year but has been operating at 75 percent of capacity. Officials at Kennecott's parent, London-based RTZ Corp., said Thursday the nation's third-largest smelter is still producing, although they declined to say how much.
The strike, if it lasts more than a few days, could worsen one of the tightest stock situations in about a year, said metals analyst Richard Hirsch at Deutsche-Sharps Pixley Metals Inc.
``There continues to be record levels of demand in the face of widely expected mine supply increases,'' Hirsch said. ``We have seen these increases and instead have seen sharp drawdowns in available stocks.''
The London Metal Exchange continues to report sharp declines in stocks at its warehouse around the world amid robust demand for the base metal in automobiles, electronics and construction. Exchange supplies are the lowest since November 1995, and traders were expecting another sharp decline in the second of two weekly reports to be released Friday.
Supplies also have been tight because mine operators have been reluctant to sell in the face of relatively low prices. Growing labor troubles at some of the world's largest mines could finally provide a boost, said analyst John Gross at the Copper Journal.
Silver futures prices gave back most of the gains made last week when the New York Mercantile Exchange's Comex division reported stocks at its warehouses had fallen 13 percent to 130.8 million ounces, the lowest level in 11 years.
Investors now believe most of that silver, or about 200 million ounces, was being held in unregistered warehouses in Europe for eventual shipment to the Far East, said analyst Bernard Savaiko at PaineWebber Inc.
But he questioned the sharp drop, saying demand is expected to be strong in coming months, when India and other countries begin using the metal for jewelry-making.
December silver fell 11.8 cents to $4.90 a pound after falling as low as $4.88 a ounce.
Heating oil and unleaded gasoline futures rose after the Energy Department reported before trading began that stocks of heating oil and other distillate fuels fell 900,000 barrels last week to 111.4 million barrels, while gasoline stocks fell a sharp 2.6 million barrels to 194.4 million barrels.
The numbers contradicted the American Petroleum Institute's report, which said heating oil inventories rose 673,000 barrels to 114.3 million barrels and that gasoline stocks fell 509,000 barrels to 195.8 million barrels.
The Energy Department report painted a picture of dangerous tightness, analysts said. According to the government, U.S. distillate inventories, which include heating oil, now are 22 million barrels, or 16.5 percent, below last year.
The gains were muted, however, as some investors sat on the sidelines ahead of Friday's meeting between Energy Secretary Hazel O'Leary and top oil executives in Washington. The potential for wide price swings this winter could lead the government to seek a ban on exports to Europe, where supplies also are tight.
November heating oil rose 0.73 cent to 72.29 cents a gallon; November unleaded gasoline rose 1.08 cents to 66.53 cents a gallon.